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Walmart Challenges Amazon with New Shipping Plan

Retailer scraps its subscription-based ShippingPass in favor of new offer

February 1, 2017 | Retail & Ecommerce

Moving to challenge one of Amazon’s key features, Walmart introduced free two-day shipping for home delivery on orders of at least $35.

US Internet Users Who Live in a Household with an Amazon Prime Subscription, Dec 2014-Nov 2016 (millions and % of respondents)

The new shipping offer replaces an earlier one, ShippingPass, which offered free two-day shipping for an annual $49 fee.

“In today’s world of ecommerce, two-day free shipping is table stakes,” said Marc Lore, president and CEO of Walmart eCommerce US, in announcing the new service.

The Walmart service applies to many but not all of its products. It undercuts one Amazon shipping option, which allows for free shipping (not two-day) on orders of $49 or more.

Amazon has used free shipping as a powerful recruitment tool for its Amazon Prime service. It continues to add benefits to Prime, from access to movies and books to same-day delivery, but it’s core value has always been free two-day shipping. Amazon has been able to ride this offer to gain a steadily increasing share of US households. Data from Cowen and Company revealed that by November 2016, nearly half of US internet users lived in a household with an Amazon Prime subscription.

US Holiday Season Retail Ecommerce Sales Share for Select Retailers, 2015 & 2016* (% of total holiday season ecommerce sales)

Amazon has used Prime to build a huge edge in ecommerce share in the US. In the recent holiday season, Amazon racked up 38.0% of online sales, compared with 2.6% for Walmart, according to Slice Intelligence. Despite heavy investments in ecommerce, including the $3 billion purchase of Jet.com, Walmart actually lost some share during the holidays.

In order to compete, Walmart needs to up the ante and offer deeper discounts and better services than Amazon, so yesterday’s news from Walmart is likely to be followed by more soon. “Two-day free shipping is the first of many moves we will be making to enhance the customer experience and accelerate growth,” said Lore.

Yory Wurmser

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